Driving ESG performance: the roles of financial literacy and fintech adoption through digital transformation

Abstract

Purpose: This study aims to examine how financial literacy (FL) and fintech adoption (FA) influence firms’ environmental, social and governance (ESG) performance, drawing on resource dependency theory (RDT) and dynamic capabilities theory (DCT).

Design/methodology/approach: Using survey data from UK financial institutions and employing partial least squares structural equation modeling, we analyze the mediating role of digital transformation and the moderating role of absorptive capacity.

Findings: Results show that financial literacy (FL) and Fintech adoption (FA) are significant drivers of ESG performance. Digital transformation mediates their effects, indicating that technology-enabled change amplifies resource optimization. Absorptive capacity positively moderates relationship between financial literacy (FL) and ESG, whereas negatively moderates in Fintech adoption (FA) and digital transformation, suggesting that foundational capabilities in FA and digital transformation independently enhance ESG outcomes. By integrating underexplored variables into RDT and DCT, this study provides empirical evidence that Fintech adoption and financial literacy are valuable strategic resources for improving sustainability performance.

Originality/value: These findings extend current RDT and DCT inform practice by highlighting that firms actively adopting Fintech and embedding digital transformation achieve superior ESG results. The study offers guidance to decision-makers and regulators seeking to foster sustainable innovation in the financial sector.